Crime seems to be an inescapable part of running a retail business, but the total costs to the public and to businesses are immense. CRR has collected data from retailers in the U.S, UK, France, Germany, The Netherlands, Spain, Sweden and Italy in order to assess the impact of retail crime in the U.S. and Europe. Three hundred and twenty-eight retailers have been surveyed in these eight countries with a combined total of 48,000 stores, covering crime events during 2018-19.
$106.36 per head
- almost $26 (€21.3) billion
$76.90 per head (€63.16)
Shrinkage. Most retailers use shrinkage to check their performance in curbing losses. Shrinkage measures losses as the difference between actual sales and theoretical sales (based on actual deliveries). Shrinkage is the difference between the two figures. However shrinkage is affected by administrative and staff errors as well as actual crimes, and one needs to deduct an estimate for ‘error’ from shrinkage in order to calculate crime losses.
Shrinkage and the losses caused by crime. The average shrinkage rate was 1.44%, the highest being Italy (1.67%) and the lowest Germany (1.12%), a combined total of $77.618bn. However, when the estimate for error is deducted, the combined costs of crime in the U.S> and Europe amounts to a total of $60.673bn. Error, in this context, involves issues of poor administration such as mispricing items, incorrect deliveries, raising incorrect invoices or accounting incorrectly for sales items.
Table 1 and Figure 1show the average shrinkage figure for each country in 2019.
The Sources of Retail Crime 2019
Crime can be committed by customers, employees, through the supply chain and in warehouses. Payment fraud and cybercrime can also occur both internally and externally.
External theft. Because retailers increasingly find that part of customer theft (shoplifting) is caused by gangs (Organized Retail Crime, or ORC) we have separated ‘normal’ shoplifting from criminal activities by large-scale and local gangs of thieves in Figure 2, dealing with the different types of retail crime. As far as we are aware this is the first attempt systematically to provide information about the precise impact of ORC. The total cost of organized crime against retailers was $8.612bn, comprising $3.786bn in Europe and $4.826bn in the U.S.
These figures for ORC as part of customer theft are given in Table 2. The figures for the U.S. show customer theft as 32.2%, boosted primary by ORC which is now estimated to be 11.1% of external crime. Until fairly recently, in the U.S. the most significant retail crime was that committed by staff, not customers, but the introduction of improved internal systems and the growth of ORC may be the reason why U.S. figures now look more similar to those experienced in Europe.
Employee theft. Employee theft, which varies from occasional ‘treats’ or petty pilfering all the way to large-scale frauds is an average of 18.5% of retail shrinkage. Much of this crime goes undetected by retailers, so the totals are estimates. In the U.S. employee theft in 2019 was estimated to be $11.349bn and $6.105bn in Europe.
Suppliers/warehousing. Fraud and crime in the supply chain is a serious problem for retailers. Whole consignments worth $500,000+ may be stolen as well as pallets of expensive merchandise. In addition to the costs of goods stolen the result may be that stock figures are completely wrong and sales are lost because goods are found to be out of stock. On average these losses were 18.6% of total shrinkage, $9.486bn in the U.S. and $6.360bn in Europe.
Cybercrime. Cybercrime, consisting mainly of theft of data, and data loss and business disruption as a result of criminal activity. The costs also include compensation paid by retailers to national organisations and affected customers, although the sample is not large enough in each country to provide robust conclusions. The costs of cybercrime were a total of $5.546bn, made up of $3.652bn suffered by American retailers and $1.893bn in Europe. Although cybercrime is difficult to define precisely, the costs of cybercrime are expected to continue rising over the next few years making cybercrime a major cost of doing business in America and Europe.
Note: the CRR figures above do not include all the costs of retail crime, because we have not provided estimates of the costs of loss prevention staff and investment in CCTV, electronic article surveillance, and software and hardware used for exception reporting and to monitor the estates.